Circular Flow of income Flashcards
definition of the Circular flow of income
An economic model showing the flow of goods and services, factors of production, and payments between households and firms within a closed economy
How do firms give to households
Income, rent, wages, interest and profit
How do Households give to firms
Expenditure on goods and services
3 ways of measuring economic activity
National output
National Expenditure
National Income
What is National Output
The value of the flow of goods and services from firms to households
What is national expenditure
The value of spending by households on goods and services
What is national income
The value of income paid by firms to households in return for land, labour, and capital
What are injections
Anything that adds money into the circular flow
name the three injections
Exports (X), Investment(I), and Government Spending (G)
What are withdrawals
anything that removes money from the circular flow
What are the three withdrawals
Imports(M), Taxation(T), and Savings(S)
